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Governmenl 
Publication* 




Ontario 



Ontario 
Energy 
Board 



Fiscal Year Ended March 31, 1984 



ANNUAL REPORT 




Digitized by the Internet Archive 
in 2013 



http://archive.org/details/annualreportonta1984onta 










if v % 

'"'10 

Energy 
Ontario 



Ministry 

of 

Energy 



Queen's Park 
Toronto, Ontario 
M7A 2B7 
416/965-4286 
Telex 0621 7880 



August 31 , 1984 



TO THE HONOURABLE JOHN BLACK AIRD 
O.C. , Q.C. , B.A. , LL.D. 



Lieutenant Governor of the Province of Ontario 



MAY IT PLEASE YOUR HONOUR: 

I take pleasure in submitting the 
Twenty Fourth Annual Report of the Ontario Energy 
Board for the fiscal year ended March 31, 1984. 




Minister of Energy 




Ontario 
Energy 
Board 



9th Floor 
14 Carlton Street 
Toronto, Ontario 
M5B 1J2 

416/598-1600 



June 29, 1984 



Honourable Philip Andrewes 
Minister of Energy 
Queen ' s Park 
Toronto, Ontario 
M7A 2B7 

Dear Minister: 



I have the honour to present herewith the 
Annual Report of the Ontario Energy Board for the 
fiscal year ended March 31, 1984. 



Respectfully submitted, 




Robert H. Clendining ' 
Chairman 







Ontario 



Ontario 
Energy 
Board 



ANNUAL REPOFiT 



Fiscal Year Ended March 31, 1984 



Copies available for $2.50 prepaid from Ontario Government 
Bookstore, 880 Bay Street, Toronto; telephone (416) 965-2054. 

Out-of-town customers please write (enclosing cheque or money 
order payable to the 'Treasurer of Ontario') to Ministry of 
Government Services, Publications Services Section, 5th Floor, 
880 Bay Street, Toronto, Ontario M7A 1N8. 

Telephone: (416) 965-6015 

Toll-free long distance: 1-800-268-7540. 
Northwestern Ontario 0-Zenith 67200. 

ISSN 0317-4891 7C 8:84 



CONTENTS 



INTRODUCTION 



Page 



The Board 1 

Role of the Board 1 

Jurisdiction of the Board 1 

Overview 3 



REGULATORY HEARINGS 



Natural Gas Rates 

Introduction 5 

The Consumers' Gas Company Ltd 6 

Inter-City Gas Corporation 8 

Natural Resource Gas Limited 9 

Northern & Central Gas Corporation Limited .... 9 

Tecumseh Gas Storage Limited 11 

Union Gas Limited 12 

Wellandport Gas Company Limited 15 

Gas Storage 15 

Certificates and Franchises 15 

Pipelines 

Construction 16 

Exemptions 17 

Accounting Orders 17 

ADVISORY HEARINGS 

Ontario Hydro 18 

Natural Gas Used as a Feedstock 21 

Permits and Licences , 24 

ONTARIO PIPELINE COORDINATION COMMITTEE 25 

ADMINISTRATION 27 



APPENDICES 



•A-1' 
•A-2' 

'A-3' 
•B 1 

■C 

•D' 
•E' 



Residential Rates Chanqes Granted 

- The Consumers' Gas Company Ltd 

Residential Rates Chanqes Granted 

- Northern & Central Gas Corporation 
L imi ted 

Residential Rates Chanqes Granted 

- Union Gas Limited 

Board Recommendations Relatinq to the 
Ontario Hydro 1984 Rate Proposal 

Principal Natural Gas Pipelines in Ontario 

Board Functional Orqanization Chart 

Selected Statistics 

- Major Ontario Natural Gas Utilities 



Most of the quantitative refe 


rences in this Report are expressed in 


metric units. The followinq 


conversion table is provided for your 


convenience. 






1 cubic metre(m3) 


= 


0.0353 thousand cubic feet(Mcf) 


1 thousand cubic metres(103m3 


) = 


0.0353 million cubic feet(MMcf) 


1 kilometre(km) 


- 


0.6214 miles 


1 thousand cubic feet(Mcf) 


~ 


28.328 cubic metres(m3) 


1 million cubic feet(MMcf) 


= 


28.328 thousand cubic metres(103m3) 


1 mile 

i 


z 


1.609 kilometres(km) 



INTRODUCTION 

The Board 

The Ontario Energy Board is a quasi- j ud icial regulatory 
agency of the Government of Ontario. It is comprised of 
'Members, appointed by the Lieutenant Governor in Council 
under the Ontario Energy Board Act, and technical and 
administrative staff, appointed under the Public Service 
Act. The Board is responsible to the Legislature through 
the Minister of Energy. 

Role of the Board 

The Board regulates all natural gas utilities in 
Ontario except those municipally owned and controlled. It 
is responsible for determining rates and charges for the 
transmission, storage, distribution and sale of natural gas 
in the province; for the designation and authorization of 
natural gas storage areas; for authorizing construction of 
transmission lines; for authorizing expropriations for 
natural gas pipelines; and for approving franchises for 
natural gas utilities to serve designated areas. The Board 
acts upon references from the Minister of Energy regarding 
Ontario Hydro wholesale rates and other rate-related 
matters; from the Minister of Natural Resources regarding 
certain oil and gas matters; and from the Lieutenant 
Governor in Council on any guestion respecting energy. 

Jurisdiction of the Board 

Under the Ontario Energy Board Act 

Approving or fixing rates and other charges for the 
sale of gas by transmitters, distributors and storage 
companies and for the transmission, distribution and 
storage of gas. 

Ensuring compliance by gas utilities with the Uniform 
System of Accounts. 



Granting leave to construct pipelines and related 
f ac i 1 i t ies . 



- 2 - 

Granting authority to expropriate land for pipelines 
and related facilities and authorizing pipeline 
crossings of highways, utility lines and ditches. 

Recommending to the Lieutenant Governor in Council the 
creation of designated gas storage areas, authorizing 
their use and arbitrating compensation payable to 
landowners under certain conditions. 

Approving gas storage agreements and allocating surplus 
storage facilities to a transmitter or distributor. 

Unitizina the interests in gas and oil spacing units 
and pools. 

Reporting to the Lieutenant Governor in Council on 
applications by gas utilities to sell their assets or 
amalgamate with other utilities and on applications by 
persons to acguire shares of a gas utility which would 
result in a holding of more than 20 per cent of such 
shares . 

Upon reference from the Lieutenant Governor in Council, 
reporting on any guestion respecting energy. 

Upon reference from the Minister of Energy, reporting 
on Ontario Hydro rate proposals and related matters. 

Under the Municipal Franchises Act 

Approving the terms of a proposed by-law granting a 
franchise to supply gas to a municipal corporation or 
to distribute gas in the municipality, and extending 
the term of such franchise or of a transmission 
franchise . 



Granting certificates of public convenience and 
necessity to construct works and supply gas in 
municipal i t ies . 



- 3 - 

Under the Petroleum Resources Act 

Jpon reference from the Minister of Natural Resources, 
reporting on certain applications for permits and 
1 icences . 

Under the Public Utilities Act 

Don trolling gas utilities that contravene municipal 
Dy-laws prohibiting the distribution and sale of gas 
containing sulphuretted hydrogen. 

Jnder the Assessment Act 

deciding whether certain gas pipelines are transmission 
lines for assessment purposes. 

Jnder the Toronto District Heating Corporation Act, 1980 

Jpon appeal by a customer, fixing steam rates for 
certain customers of the Toronto District Heating 
Corporation . 



Lew 

Fhe operating environment of the Board during the fiscal 
vas affected by various chanqes. In addition to a 
le in inflation, Federal Government arrangements with 
:a resulted in a lessening of the rate of increase in 
lolesale cost of gas to the utilities. As a conseguence 
;se and other factors, there were less significant rate 
nations filed by Ontario utilities and fewer rate 
ises granted. This trend is expected to continue in the 
it fiscal year. 

fhen each rates application was being considered, the 
:y was reguired to inform the Roard whether it was 
:ing within the Ontario Government restraint program and 
Lt had taken steps to remain within the guidelines for 
jration of the program. 



- 4 - 



In addition to the annual reference from the Minister 
of Energy regarding Ontario Hydro wholesale rates, the Board 
also received a direction from the Lieutenant Governor in 
Council to hold public hearings and report on aspects of 
natural gas supply and pricing of concern to Ontario 
industries using natural gas as a feedstock. These 
references and eleven applications for gas rate changes, as 
well as thirty-one other proceedings, were considered by the 
Board and are summarized in this Report. 



- 5 - 



REGULATORY HEARINGS 

Natural Gas Rates 

Introduction 

On June 30, 1983 the Federal Government announced that 
an amendment bo the September 1, 1981 Memorandum of 
Agreement had been successfully negotiated with the 
Government of Alberta. The effect of this amendment was to 
stabilize natural gas pricing to January 31, 1985. During 
this period, the wholesale price For natural gas was not to 
exceed 65 percent of the price of oil. 

During the fiscal year, this action had a beneficial 
influence in moderating the previous escalation of natural 
gas rates in Ontario. The effect of this moderation on 
typical residential customer rate changes granted to each of 
the three major Ontario gas utilities is shown in the 
Appendices . 



A comparison of Federal Government changes in wholesale 
gas costs to the utilities for the past two fiscal years is 
set out below: 

Amount of Increase (Decrease) 



$ per 10 3 m 3 



1983-84 



1982-83 



August 1, 1983 (0.38) 



February 1 , 1 984 



0.3 8 



August 1, 1982 9.38 
September 1, 1982 4.51 
February 1, 1983 2.24 



- 6 - 



The Consumers' Gas Company Ltd. 

Consumers' distributes natural gas in parts of southern 
and eastern Ontario, including Metropolitan Toronto. It 
also operates under the names of Brockville Gas, Grimsby 
Gas, Ottawa Gas and Provincial Gas. 

Consumers' previous rates application for its 1983 test 
year was summarized in the last Annual Report. However, 
Board Reasons for Decision relating to Phase II of that 
application were not issued until April 26, 1983. The Board 
concluded, among other things, that future cost allocation 
studies should be based on rate schedules, including a 
separation between small volume and large volume high load 
factor service (Rate 110). The Board also concluded that 
establishing Cyanamid Canada Inc. (a current Rate 110 
customer) as a separate rate class was not justified. 

The Board recognized the trend of increasing indicated 
overcontribution from the high load factor customer class 
(Rate 110) compared to the continuing increase in the 
indicated undercont ribut ion of the residential customer 
class. In order to modify this trend and to recognize the 
non-cost factors, the Board ordered the utility to reduce 
the commodity charge to Rate 110 customers. The revenue 
shortfall resulting from this reduction in rates was to be 
recovered through rate increases to the residential and 
general service customers. 

Consumers' new main rates application for its 1984 test 
year was filed in April and heard in June, July and August, 
1983. Consumers' reguested rate increases to avoid 
incurring a forecast revenue deficiency of $19.5 million in 
its 1984 fiscal year. In its Reasons for Decision of 
November 1, 1983 the Board determined that a reasonable rate 
of return on rate base was 12.80 percent and, after making a 
number of adjustments, that there would be no revenue 
deficiency in Consumers' 1^84 fiscal year and, therefore, no 
need for rate increases. 



- 7 - 



The following table shows the siqnificant financial 
elements of Consumers' final submission and the Board 
Decision for the 1984 test year. The previous Board 
Decision for the 1983 test year is shown for comparison. 



P_ EBRD 386 - 
I Previous 

Board 
Dec ision 
Jan. 26/83 



EBRD 395 



Pinal 
Consumers ' 
Submission 



New 
Board 
Dec ision 
Nov. 1/83 



Rate Base 
Utility Income 
Indicated Rate of 
Return on Rate Base 

Cost of Capital 
Long-term Debt 
Unfunded Debt 
Preference Shares 
Accumulated Tax 

De f errals 
Common Eguity 
Allowed Rate of Return 
on Rate Base 

Revenue Deficiency 



Test Year Ending September 30 
1983 1984 1984 

($000's) 



1 ,155 
134 



,729 
,934 



11. 6 755 



11 

13 

9 



.48% 
.50% 
.8 7% 



1 ,225,600 
150,200 

12.2 6% 



12.11% 
10.30% 
11 .07% 



1 ,211 ,700 
15 5,100 

12.80% 



12.11% 
10.00% 
10.9 8% 



15.7 5% 


16.00% 


15.30% 


12.5 2% 


13.0 5% 


12.80% 


20,100 


19,500 






Consumers' proposed to recover $23,345 million in 
unabsorbed demand charges through rates in its 1984 test 
year of which $20,341 million was expected to be incurred in 
its 1983 fiscal year. It further proposed that $5,223 
million forecast unabsorbed demand charges in 1984 should be 
recovered in rates in its 1985 fiscal year. The Board 
decided that of the total forecast of $28,568 million, 
$8,227 million should be recovered via rates in Consumers' 
1984 test year. The Board also allowed the recovery through 
rates, in Consumers' 1984 test year, of unabsorbed demand 
charges of $7,090 million forecast- to be incurred in 
Consumers' 1983 fiscal year. The total recoverable 
unabsorbed demand charges in the test year were, therefore, 
$15,317 million. 



- 8 - 



As previously noted, Cyanamid Canada Inc. requested 
that it be placed in a separate rate class for firm gas 
service and that it be charged a "cost based" (as distinct 
from "cost related") rate for the balance of 1983 and 
a"decremental rate" from January 1, 1984. These requests 
were denied by the Board. On November 28, 1983 Cyanamid 
petitioned the Lieutenant Governor in Council to vary the 
Board Decision by ordering Consumers' to comply with 
Cyanamid's requests and make appropriate adjustments. This 
petition was pending at the end of the fiscal year. 

Inter-City Gas Corporation 

Inter-City is a Manitoba-based gas utility which 
distributes gas in and west of Fort Frances, Ontario. 

Inter-City had filed a new main rates application on 
August 12, 1982. Pending the hearing of the main 
application, Inter-City, on August 8, 1983, requested an 
interim order, without a hearing, to provide for a reduction 
in its gas rates. By Order dated August 25, 1983 the Board 
granted the reguested reduction of 6.04 cents per Mcf 
effective September 1, 1983. 

A further Order, dated March 16, 1984, granted a 
one-time rate refund of 4.694 per Mcf reflecting a reduction 
by the U.S. Federal Energy Requlatory Commission of the 
transportation rate of Inter-City Minnesota Pipelines 
Limited. 



By application dated January 16, 1983 Inter-City 
applied for temporary winter service rates to Boise Cascade 
Canada Limited for the period November, 1983 to March, 1984 
inclusive. This application was deferred to the hearing of 
the main application which was pending at the end of the 
fiscal year . 



- 9 - 



Natural Resource Gas Limited 

Natural Resource Gas (NRG) is a small utility serving 
Aylmer and surroundinq communities and acquires its natural 
gas supply from Union Gas, Consumers' Gas and local 
producers . 

NRG filed a main rates application on February 21, 
1983. On July 21, 1983 NRG applied for an interim increase 
in its rates, effective Auqust 1, in order to recover 
increases in the wholesale cost of gas. The interim hearing 
commenced on October 28, 1983 at which time it was adjourned 
until further notice at the request of NRG. On February 23, 
1984 NRG withdrew its interim application and it was decided 
to proceed with the main application. Consideration of the 
main application began on April 30, 1984 and after two days 
of hearing was adjourned pending resolution of NRG's gas 
supply agreement with Union Gas. 

Northern and Central Gas Corporation Limited 

Northern and Central distributes natural gas in parts 
of northern and southeastern Ontario. 

As noted in the previous Annual Report an 
Order-in-Council dated March 16, 1983 prevented the Board 
from issuing an Order implementing its March 8, Reasons for 
Decision because the Minister of Consumer and Commercial 
Relations had referred the Decision to the Inflation 
Restraint Board (I.R.B.) for consideration. The I.R.B. 
changes are identified in the table which follows. 



By application dated June 2, 1983 Northern claimed that 
it would experience a revenue deficiency of $9,354,300 in 
its 1984 test year. It proposed that this deficiency be 
recovered entirely from its fixed rate classes. This 
application was heard in October, and the Board Reasons for 
Decision were issued on December 30, 1983. 



- 10 - 

The following table shows the siqnificant financial 
elements of Northern's final submission and the Board 
Decision for the 1984 test year. The previous Roard 
Decision for the 1983 test year is shown for comparison. 



p. EBRO 384 _. 
I Previous ' 
Board 
Decis ion 
Mar. 6/83 



EBRD 396 



Final 
Northern 
Submission 



New ' 
Board 
Decision 
Dec. 30/83 



Test Year Ending December 31 
1983 1984 1984 

($000's) 



Rate Base 

Utility Income 

Indicated Rate of 
Return on Rate Base 

Cost of Capital 
Long-term Debt 
Preference Shares 
Accumulated Tax 

De f errals 
Common Eguity 

Allowed Rate of Return 
on Rate Base 

Revenue Deficiency 



237,986.7 
23,412.5 

9.84% 

11 .9155 

5.55% 

3.00% 
16.00%* 

12.6 5%* 
13,620.0* 



274,215.0 
31 ,448.3 

11 .47% 

12.5 5% 
6»16/o 

3.00% 
16.2 5% 

13.14% 
9,354.3 



273,715.0 
31 ,683.9 

11 .58% 

12.5 5% 
6.16/0 

3.00% 
15.75% 

12.98% 
7,820.4 



* Subseguently revised as follows by Order-in- 
Council 1754/83 dated June 24, 1983 based on 
Inflation Restraint Board review. 

Common Eguity 15.85% 

Allowed Rate of Return 12.59% 

on Rate Base 

Revenue Deficiency 13,329.2 

Ihe Board determined that a $7,820,400 revenue 
deficiency would exist in the 1984 test year and accepted 
the method proposed by Northern for the recovery of this 
deficiency from the fixed rate classes. This would result 
in a maximum annual increase of about 4 percent for a 
typical residential customer. The Board confirmed an 
interim rate decrease to special contract customers based on 
cost allocation evidence and its conclusion that rate 
increases to industrial customers at that time could 
precipitate further reductions in sales and the potential 



- 11 - 

loss of industrial customers to an alternate fuel source 
which would have the effect of increasing rates to all 
remaininq customers. 

The Board rejected Northern's request to recover in 
rates, over the next five years, a TransCanada PipeLines 
demand charges payment of $2.3 million (includinq $1 million 
interest) as a result of unsuccessful litigation concerning 
a contract between the companies. The Board also rejected 
Northern's proposal for a deferred account to accumulate 
unrecovered demand charges resulting from future "force 
majeure" situations with its contract customers. 

Tecumseh Gas Storage Limited 

Tecumseh provides underqround gas storage facilities in 
Lambton County to serve Consumers' Gas. It does not 
distribute natural gas. 

On March 7, 1983 Tecumseh applied for increased rates 
to be charged for the storage and transportation of gas. 
This application was heard in May and the rate proposals 
were approved subject to adjustment to reflect the reduced 
revenue deficiency determined by the Board. 

The following table shows the significant financial 
elements of Tecumseh's final submission and the Board 
Decision. The previous Board Decision is shown for 
comparison. 



EBRO 385 
I Previous 
Board 
Decision 
July 20/82 



T r 



EBRO 394 



Final 
Tecumseh 
Submission 



New ' 
Board 
Dec ision 
June 20/83 



Test Year Ending March 31 
1983 1984 1984 

($000's) 



Rate Base 51,260.8 54,228.4 54,179.9 

Utility Income 3,933.2 5,736.3 5,886.9 

Allowed Rate of Return 

on Rate Base 12.393 13.2735 13.0758 

on Common Eguity 15.00% 15.00?o 14.50% 

Revenue Deficiency 2,418.0 1,458.7 1,192.0 



- 12 - 

Union Gas Limited 

Union distributes natural gas in most of southwestern 
Ontario. 

As noted in the previous Annual Report, a main rates 
application for Union's 1984 test year was filed in July, 

1982 with pre-filinq of evidence completed in September. 
The hearing began in December, 1982 and argument was 
completed in February, 1983. 

The following table shows the significant financial 
elements of Union's final submission and the Board Decision 
for the 1984 test year. The previous Board Decision for the 

1983 test year is shown for comparison. 



EBRO 382 

' Previous ' 

Board 

Decision 

April 8/82 



FBRO 388 



New ' 
Final Board 

Union Decision 
Submission April 22/83 



Test Year Ending March 31 
1983 1984 1984 

($000's) 



Rate Base 713,350 

Utility Income 78,278 

Indicated Rate of 

Return on Rate Base 10.97% 

Cost of Capital 

Long-term Debt 11 .85% 

Short-term Debt 18.00% 

Preference Shares 7.83% 

Common Eguity 16.75% 

Allowed Rate of Return 

on Rate Base 13.08% 

Revenue Deficiency 31,062 



867,071 
80,153 

9.24% 

12.01% 

12.00% 

9.9 0% 

17.00% 

13.08% 
67,515 



809,150 
85,364 

10.5 5% 

11 .96% 

10.75% 

9.90% 

15.60% 

12.65% 
39,355 



One of the cost items contributing to Union's claimed 
revenue deficiency was the fact that the unit cost of 
synthetic natural gas (SNG) purchased by Union from Petrosar 
Limited was significantly higher than the unit cost of 
Union's other gas supplies. The total premium accumulated 



- 13 - 

under the Petrosar contract during the period November 1, 
1981 to March 31, 1983 was approximately $60 million. 
However, successful mitiqation by Union had reduced the 
premium to $9,217 million, which amount the Board directed 
be collected in rates in Union's 1984 and 1985 fiscal 
years. The Board further ordered that no part of this net 
premium was to be included in rate base nor interest paid on 
this amount after March 31, 1983. 

Union forecast a 1984 test year cutback in the Contract 
Demand (CD) qas supply contract which would result in 
unabsorbed demand charges of $8,693 million and it proposed 
that these be included in its cost of qas for the 1984 test 
year. The Board disallowed the charges and Union 
subsequently applied to the Divisional Court for leave to 
appeal the Board decision in this regard. Leave to appeal 
was granted but the appeal was dismissed on November 1, 
1983. 



Union's proposal to recover the revenue deficiency 
from the various customer classes on an incremental basis 
was accepted by the Board. However, the Board did not 
accept Union's proposed structural change to its rate 
schedules. Further, Union's proposal to revert to two rate 
schedules instead of the current single schedule for 
residential and non-contract commercial and industrial 
customers was rejected by the Board in the interests of 
stability and in the absence of any compelling reason for 
such a split at this time. 

During this proceeding the Board authorized two rate 
changes on an interim basis, subject to adjustment, to 
recover increases in the cost of gas. The Board decision 
confirmed the Interim Orders and directed that $300,000 in 
inventory credits be passed on to the affected customers. 
The Board also ordered the recovery of the reduced revenue 
deficiency by increasing designated rate schedules. 



- 14 - 

The Board expressed concern about the alternating 
increases in the demand and commodity components of rate 
schedules. The semi-annual qas cost pass- throuqhs , imposed 
by the Canada/ Alberta energy pricing Memorandum of Agreement 
prior to the time of this hearing, had resulted in increases 
in the commodity charge, whereas past annual revenue 
deficiencies impacted more heavily upon the demand 
component. The Board is primarily concerned with rate 
stability but it also recognizes that this may result in an 
inherent and unavoidable characteristic when "passing 
through" the upstream cost of gas. The Board is to be kept 
informed of Union's continuing efforts to maintain 
reasonable relationships between commodity and demand 
charges . 

A new rates application for Union's 1985 test year was 
filed in September, 1983. This application was heard in 
December, 1983 and in January and March, 1984. The hearing 
was adjourned on January 23 to prepare for consideration of 
the matter of a security deposit reguired by Union from 
Natural Resource Gas Limited. The hearing was reconvened on 
March 2, 1984 and concluded in the same month. The Board 
decision was pending at the end of the fiscal year. 
(Reasons for Decision regarding rates were subsequently 
issued on April 24, 1984 followed by Supplementary Reasons 
for Decision regarding the NRG security deposit on April 26, 
1984. ) 

Union Gas Limited Joint Venture with Imperial Oil Limited 



In 1968 Union and Imperial entered into a joint venture 
for the development and use of the designated gas storage 
areas known as the Bickford Pool and the Sombra Pool. Union 
was named operator of this joint venture. For some years 
Union has had an application pending for the fixing of final 
rates for storage service by the joint venture, thus 
enabling the Board to deal with the matter on an interim 
basis. The main rates hearing commenced on March 27 and 
concluded on April 5, 1984 and the Board decision is 
pend ing . 



- 15 - 

Wellandport Gas Company Limited 

Wellandport is a small natural qas utility serving 
customers in the Townships of West Lincoln and Wainfleet in 
the Regional Municipality of Niagara. It produces most of 
its own natural gas but also purchases some from Union Gas. 

On January 6, 1984 the Board approved, without a 
hearing, Wei 1 andport * s December, 1983 application to extend 
its existinq interim rates for the sale of qas for a period 
of not more than one year commencing December 13, 1983. 

Gas Storaqe 

On September 22, 1983, following a hearing, the Board 
designated Gaiswinkler Enterprises Limited as manager of a 
tertiary production operation in the Gobies Pool, previously 
managed by Rayrock Resources Limited. 

Certificates and Franchises 

During the fiscal year the Board granted four 
certificates of public convenience to Northern & Central Gas 
Corporation Limited as follows: 

a) Town of Picton, Villages of Bloomfield and Wellington, 
Township of Hallowell; 

b) Town of Mattawa; 

c) Village of Sundridge, Township of Strong; 

d) Township of Oliver. 



At Northern's request, the Board also amended the 
certificate qranted in the previous fiscal year for the Town 
of Valley East . 



- 16 - 

The Board also approved or prescribed the terms and 
conditions of twelve franchise agreements for the 
distribution of natural qas, as follows: 



Consumers' Gas 



Northern and Central Gas - 



Townships of Mono and Clarence 

Towns of Picton* and Mattawa*; 
Townships of Hallowell; Brighton; 
Sophiasburgh* ; Strong* and 
Oliver* ; 

Villages of Bloomfield; 
Chesterville and Wellington. 



* municipalities enfranchised for the first time. 

Pipeline Construction 

Six applications for leave to construct by Northern & 
Central and one by Union Gas were heard in the fiscal year, 
as follows: 

Northern and Central 

- from TCPL Transmission Line, to District Regulator 
Station, Town of Brighton. 

- from Township of Sophiasburg to Village of Wellington. 

- from Town of Rayside-Bal f our to Town of Valley East. 

- from Township of Papineau to Town of Mattawa. 

- from Village of South River to Township of Strong. 

- from Township of Paipoonge to Township of Oliver. 

Union Gas 






- from St. Mary's to Beachville. 

These were all approved subject to conditions 

concerning environmental and construction aspects, and with 

provisions for the filing of post-construction cost and 
environmental information. 



- 17 - 

Pipeline Exemptions 

In special circumstances the Board may exempt a person 
from obtaininq leave to construct a particular transmission 
pipeline. During the fiscal year the Board granted Union 
Gas an exemption from hearing in the case of the Brantford 
Township NPS6 Line. 

Accounting Orders 

Under the Board Uniform Accounting Procedures, Union 
Gas requested three accounting orders, for (a) a change in 
depreciation rates, (b) amortization of the SNG premium for 
the period November 1, 1981 to March 31, 1983, and (c) an 
amendment to the Board Accounting Order issued May 4, 1982 
with respect to the final accounting of a Petrosar SNG 
premium account. All three requests were qranted. 



In addition, the Board received requests from 
Consumers', Northern & Central and Union for accountinq 
orders authorizinq the deferral of the net impact of 
February 1, 1984 chanqes in the price component of the cost 
of natural gas. These requests were pendinq at the end of 
the fiscal year. 



- 18 - 

ADVISORY HEARINGS 

Ontario Hydro 

L- A reference was received from the Minister of Energy on 
April 13, 1983 requesting the Board to examine and report on 
Ontario Hydro's proposal to change its rates effective 
January 1, 1984. The hearing commenced May 31 and concluded 
June 30, 1983, after which argument was submitted by the 
various parties. The Board reported to the Minister of 
Energy on August 31, 1983. 

Ontario Hydro proposed a total net revenue requirement 
for 1984 of $3,767 million, an increase of $461 million over 
the level expected in 1983. This revenue increase would be 
realized throuoh $124 million in hiqher sales and $337 
million in the proposed rate increases. The major factors 
necessitating the increase in the 1984 revenue reguirement 
were forecast by Hydro to be: load and system growth ($506 
million increase), the economic environment ($162 million 
increase), and changes in financial, depreciation and 
accounting policies ($207 million decrease). Hydro's 
proposal would have resulted in an average increase of about 
9.7 percent for the 321 municipal utilities, the 
approximately 100 industrial customers and Hydro's rural 
retail customers. 

In its report to the Minister, the Board recommended 
that the 1984 revenue reguirement be reduced by $116 
million, as shown in the Appendices thereby lowering Hydro's 
proposed average rate increase to 6.3 percent from 
9 . 7 percent . 

The Board made the following specific recommendations 
and comments: 



Recommendations Relating to Cost Allocation and Rate Design 

1. That the appropriateness of the modified CPP be 

reviewed as a pre- requisi te to the acceptance of any 
rates based on its use. 



- 19 - 



2. That Hydro strive to brinq seasonal rates into effect 
in 1985, toqether with diurnal differentiation and that 
early notice should be qiven of this intention. 

3. That Hydro ensure that the study of customer 
classification and diversity benefits is completed and 
included in its 1985 rate proposal. 

4. That Hydro review the sharinq of diversity benefits in 
qeneral and the Bary Correction in particular. 

5. That Hydro review the boundary between the qeneration 
and transmission functions as well as the proportion of 
grid costs that should be treated as energy related. 

6. That an off-peak excess demand charqe should not be 
included in the rate schedules. 

7. That the extended demand interval measurement as 
proposed by Hydro be accepted. 

8. That the interrupt ible rate discount be adjusted to 81ct 
per kW for 1984. 

9. That the distributing companies be included with the 
municipal utilities for cost allocation purposes. 

10. That the proposal for impact relief for the direct 
industrial customers be rejected and the new rate be 
phased in . 

11. That cost allocation methodology proposed and 
recommended but not implemented should not be excluded 
from reconsideration in the review of a subsequent rate 
proposal . 

1-2. That the blended rate proposed by Hydro be rejected. 

13. That the intermittent rate as proposed by approved on 
an experimental basis subject to annual review. 

14. That intermittent power should be made available to all 
bulk power customers and that separate meterinq or 
other certain means should be employed to ensure that 
there is no conversion of firm power to intermittent 
power . 

Recommendations Relating to Future Hearings 



1. That Hydro's proposal to alter the schedule for the 
preparation of load forecast for future hearings be 
accepted on a trial basis. 

2. That the economic assumptions underlying the load 
forecasts, especially as to economic growth rates be 
explicitly stated. 



- 20 - 



3. That the operation of NPD should be continued and that 
the Board be informed of the negotiations with AECL at 
the next hearinq respectinq the cost of steam and OM&A 
costs . 



4. That Hydro's present policy as to the pricing of power 
used internally is inconsistent with that used for 
steam and such inconsistency should be reviewed in next 
year's hearinq. 

5. Hydro should present an up-to-date review of its 
progress in obtaininq permission for new transmission 
lines at Bruce in next year's hearinq. 

6. The treatment of disallowed nuclear aqreement payback 
costs be examined further in next year's hearinq. 

7. That Hydro submit a report at next year's hearinq on 
the status of its cobalt neqotiations with AECL. 

8. That Hydro provide more detailed support for its 
methodoloqy for forecastinq hydraulic production at 
next year's hearinq. 

9. That the staff and compensation levels for non-reqular 
staff be closely examined at next year's hearinq. 

10. That in future submissions, overtime costs be shown 
separately by branches as part of the qeneral 
compensation information. 

c 

11. That the Atrium space should be vacated as soon as 
possible and that the Board should be informed of 
proqress in this area. 

12. External marketinq advice should be souqht by Hydro and 
presented in evidence, at least in a preliminary 
fashion, in next year's hearinq. 

13. Evidence on the maqnitude of traininq costs to be 
capitalized be filed at next year's hearinq. 

14. That Hydro prepare a list of consistently delinquent 
municipalities for introduction at next year's hearinq, 
if requested by the Board to do so. 

15. That Hydro be prepared to review its accountinq 
policies, practices and procedures in respect of heavy 
water in next year's hearinq. 

16. That Hydro present a thorouqh review of Lennox for 
presentation at the next hearinq which should include a 
study of its potential usefulness in the 1990s, the 
cost to decommission and a proposal to accelerate its 
write-off. 



- 21 - 



17. That Hydro produce at next year's hearing a comparison 
of its capital budgeting and cost control process with 
that followed by comparable U.S. utilities, including 
the material filed with those utilities' regulatory 
boards in regard to this subject. 

18. That Hydro in next year's hearing address the issue as 
to whether the accumulated provision accounts should 
continue to be treated as debt in computing the debt 
ratio. 

Recommendations Relating to Other Matters 

1. That Hydro reconsider policies with respect to exchange 
gains or losses resulting from premature retirement of 
debt . 

2. That Hydro reconsider policies with respect to 
specialized training costs. 

Comments for Consideration of the Minister 

1. That Hydro seek an amendment to the Power Corporation 
Act to allow it to charge an appropriate rate of 
interest on its overdue accounts. 



3 



Natural Gas Used as a Feedstock 



Order-in-Council 316/83, dated February 9, 1983, 
directed the Board to examine and report on aspects of 
natural gas supply and pricing of concern to Ontario 
industries using natural gas as a feedstock. Following the 
issuance of appropriate notices, all pre-filed evidence was 
received by July 11 from interested parties. The hearing 
commenced on July 18, adjourned on August 5, reconvened on 
September 6 and concluded on September 13, 1983 for a total 
of 24 hearing days. Final written submissions and replies 
were filed by October 21, 1983. 



Submissions were received from the twenty-one parties 
listed below and evidence was presented at the hearing by 
fourteen participants and direct day-to-day participation in 
terms of cross-examination was conducted by most of those 
parties. In addition Board staff filed a report reguested 
by Cyanamid relating to cost allocations and an expert 
witness testified on that study. 



<*M$ P, i^uui^o _ 22 _ 



* C-I-L 

* Cyanamid Canada, Inc. 

* Dow Chemical Canada Inc. 

* Nit rochem Inc . 

* Sunoco Inc. 

Urban Development Institute 

* Universal Explorations Ltd. 
Canterra Energy Ltd. 

* Consumer and Corporate Affairs Canada 

* Dome Petroleum Limited 

* Consolidated Natural Gas Limited 

* TransCanada PipeLines Limited 
Industrial Gas Users Association 
Pet ro-Canada 

* Northern and Central Gas Corporation Ltd. 

* Consumers' Gas Company Ltd. 

* INCO Limited 

* Independent Petroleum Association of Canada 

* Union Gas Limited 

Nova, An Alberta Corporation 
Inter-City Gas Corporation 

* presented direct evidence and/or participated at hearing 
Note: Consumers Eight Back also appeared briefly. 

Among these participants, C-I-L, Cyanamid and 
Nitrochem, as manufacturers of ammonia-based products, were 
the largest users of natural gas as a feedstock. 

The Board heard submissions concerning two major groups 
of proposals: 

a) alternative gas supply arrangements, other than 
the traditional purchase from regulated 
distributors and , 

b) a province-wide common rate for natural gas used 
as a feedstock. 

and submitted its Report to the Lieutenant Governor in 
Council on Eebruary 10, 1984. 



- 23 - 

The Board reported that in the short-term the selling 
prices of the products of the Affected Industries are not 
influenced hy the price of natural qas, hut in the lonq-term 
they are. The price of qas affects the profitability and 
consequently the competitiveness of the Affected Industries 
which have suffered dramatic increases in their qas costs 
since 1979. The cost of qas to Ontario ammonia producers is 
hiqher than that to their competitors in Alberta, the United 
States and beyond North America. The cost disadvantaqe is 
expected to continue through 1986. Financial hardship, to a 
varyinq deqree, will continue for the Ontario ammonia 
producers and other larqe-volume natural qas users as lonq 
as the price of oas remains inflexible compared to the 
variable prices of the end products of these industries. 

The Board recommendations were as follows: 



1. That direct purchasinq of natural qas, reqardless of 
end use, by any Ontario user be endorsed by the 
Government of Ontario as beinq in the lonq-term public 
interest, provided the interests of the Ontario 
utilities and their customers can be protected. 

2. That the Government of Ontario qive consideration to 
amendinq the Ontario Enerqy Board Act as required to 
fully implement direct purchases. 

3. That the Government of Ontario qive consideration to 
supportinq the proponents of direct purchasinq before 
the relevant requlatory bodies in other jurisdictions. 

4. That the Ontario Enerqy Board be authorized to receive 
and review in public rate hearinqs or such other time 
as is appropriate any proposed direct purchase 
arranqements concerninq natural qas to be delivered for 
use in Ontario, with the objective of approvinq such 
arranqements if, in the opinion of the Board, they were 
in the public interest and adequately protect the 
interests of other parties in Ontario. 

5. That the proposal by Nitrochem and Cyanamid for a 
common feedstock rate be rejected by the Government. 

6. That if it is deemed appropriate by the Government to 
assist ammonia producers in Ontario a direct subsidy be 
considered by the Government in preference to the 
indirect subsidy by means of a common feedstock rate. 



- 24 - 

Permits and Licences 

The Board received the following three references from 
the Minister of Natural Resources respectinq applications 
for permits to drill in designated gas storage areas. 

a) Tecumseh Gas Storage Limited for a permit to drill in 
the Wilkesport Pool, 

b) Union Gas for a permit to drill in the Dawn 251 Pool, 

c) Forbes Resources for a permit to drill in the Dawn 
59-85 Pool. 



The Board issued Reports to the Minister recommending 
granting of the permits in all three cases. 



- 25 - 

ONTARIO PIPELINE COORDINATION COMMITTEE (OPCC) 

The OPCC is an interministerial committee whose purpose 
is to ensure that pipelines have minimal undesirable effect 
on the land by requiring that: 

environmentally sensitive areas be avoided in route 

selection; 

landowners be adequately notified and informed; 

construction procedures and schedules be developed to 

cause the least disturbance to the right-of-way and 

surroundings; and 

clean-up and restoration measures be responsibly 

implemented to restore the right-of-way to as good a 

condition as existed before the project was started. 

Chaired by the Board Pipeline Coordinator, the OPCC 
coordinates the review of Environmental Reports and assists 
Board staff in the prepartion for hearings and the 
development of conditions of approval for pipeline 
applications. During the fiscal year, the OPCC monitored 
the construction of five pipelines approved by the Board to 
ensure compliance with conditions of Board Orders. 

Three Ministries that previously participated in the 
OPCC on a project specific basis, joined the Committee for 
all project reviews. The OPCC now consists of 
representatives from the Ministries of Agriculture and Food, 
Citizenship and Culture, Consumer and Commercial Relations, 
Energy, Environment, Municipal Affairs and Housing, Natural 
Resources, Transportation and Communications and when 
appropriate, the Niagara Escarpment Commission. 

Durinq the fiscal year, the Committee produced 
comprehensive "Environmental Guidelines for the Construction 
and Operation of Hydrocarbon Pipelines in Ontario" which 
were well received by industry. These Guidelines set out 
the functions and concerns of the OPCC and its relationship 



- 26 - 

to the Board. Also documented are environmental concerns of 
the member Ministries, assistance and construction 
procedures, as well as mitiqative measures for various 
construction activities. 

The close workinq relationship between the National 
Enerqy Board (NEB) and the OPCC continued throughout the 
fiscal year and the concerns of the OPCC were incorporated 
in the NEB conditions of approval for a pipeline to be 
constructed in southern Ontario. The OPCC also assisted the 
Ministry of Enerqy in the preparation for a NEB hearinq 
reqardinq a proposed propane terminal and loadinq facility 
in Elamborouah Township. 



Durinq the fiscal year, the OPCC was involved in 

monitorinq various staqes of construction of more than 500 

kilometres of natural qas pipelines under federal and 
provincial jurisdiction. 



- 27 - 

ADMINISTRATION 

As part of its continuing program of streamlining the 
requlatory process, the Board benefited this year from the 
introduction of monitoring forms which enable it to have a 
more comprehensive data base of utility activities. The 
next step in this improvement program is to computerize this 
information and adapt other emerging technologies to Board 
operat ions . 

In conjunction with ongoing initiatives regarding the 
regulatory process, the Board reorganized its staffing 
structure during the fiscal year. This reorganization, 
based on functional areas of responsibility, is shown in the 
Appendices . 

Changes in Board Members also occurred during the 
fiscal year. Messrs. D. M. Treadgold, O.C. and 3. R. Dunn 
retired. Miss S. 3. Wychowanec, Q.C. was appointed Deputy 
Provincial Secretary for Justice, Mr. R. R. Perdue, Q.C. 
became a full-time Member and Ms. M. C. Rounding and 
Mr. J. D. McFadyen were appointed to the Board. 

At the end of the fiscal year the staff of the Board 
totalled 33. Board Members and senior staff were: 



R. H. Clendining 

I . C. Macnabb 

H . R . Chat t erson 

D. A. Dean 

3 . D . McFadyen 

R. R. Perdue 

M. C. Rounding 

D. H. Thornton 

3 . C . But ler 

0. 3. Cook 

P. F. Cunningham 

S . A . C . Thomas 

D. Grader 

D . R . Cochran 



Chairman 

Vice-Chairman 

Member 

Member 

Member 

Member 

Member 

Member 

Part-time Member 

Energy Returns Officer 

Manager, Administrative Services 

Board Secretary 
Board Solicitor 

Special Projects Officer 



- 28 - 

Board total expenditures for the fiscal year were 
$2,569,654 of which $853,981 was recovered from applicants 
by way of fees and costs and paid into the Consolidated 
Revenue Fund of the Province. 

In Board Notices of Application (which are published in 
newspapers havinq major circulation in Ontario) provision is 
made for those who do not wish to actively participate in 
the hearing to write to the Board expressing any concerns 
they may have about the application. These letters are 
reviewed by Board staff when preparing for the hearing and 
are summarized at the hearing by Board counsel. In this 
fiscal year the Board received 113 letters of concern and 
several petitions, as compared to 667 letters in the 
previous fiscal year. 



In addition to letters of concern regarding specific 
applications, the Board also receives many letters and 
telephone calls from natural gas customers relating to a 
variety of difficulties which have arisen with their gas 
utility. Board staff discuss some of these matters with the 
parties in an attempt to resolve the issues and reply to all 
written complaints. 



Appendix A-1 



NATURAL GAS RATE CHANGES GRANTED TO 
THE CONSUMERS" GAS COMPANY LTD. 
FOR TYPICAL RESIDENTIAL CUSTOMERS 
(FISCAL YEAR APRIL 1, 1983 TO MARCH 31, 1984) 



A typical residential customer, using 3.77 10 3 m 3 of gas annually 
for space and water heating, would have incurred an annualized cost of 
approximately $860 based on rates in effect at the beginning of the 
fiscal year. 

During the fiscal year no rate changes were granted: 



Effective Date 



N/A 



Amount per 
10 3 m 3 

$ 



Nil 



Reason 



N/A 



Annualized effect 
on typical resi- 
dential customer 

$ 
( approximately) 

Nil 



The annualized cost for a typical residential customer remains at 
approximately $860 for fiscal year 1984. 



Appendix A-2 



NATURAL GAS RATE CHANGES GRANTED TO 
NORTHERN AND CENTRAL GAS CORPORATION LIMITED 

FOR TYPICAL RESIDENTIAL CUSTOMERS 
(FISCAL YEAR APRIL 1, 1983 TO MARCH 31, 1984) 



A typical residential customer, using 3.87 10 nr of gas annually in 
the Western Zone, or 3.77 10*m^ in the Northern Zone, or 3.12 10^m^ in the 
Eastern Zone, for space and water heating, would have incurred an 
approximate annualized cost of $796 or $806 or $691, respectively, based on 
rates in effect at the beginning of the fiscal year. 

During the fiscal year the following rate changes were granted: 





Am 


ount per 

10V 


Effective 


West 


North 


East 


Date 


Zone 
$ 


Zone 
$ 


Zone 




$ 


Jan. 1/84 


0.21 


0.73 


1.48 


Jan. 1/84 


8.44 


8.44 


8.44 




8.65 


9.17 


9.92 



Reason 



8.44 Revenue Reguirement 



Annualized effect 
on typical resi- 
dential customer 



West 
Zone 
$ 
(app 


North 
Zone 
$ 
roximati 


East 
Zone 
$ 
ely) 


1 
33 


3 
32 


5 
26 



34 



35 



31 



Based on the above, the annualized cost for a typical residential 
customer at the end of the fiscal year would have been approximately 
4.3 percent higher or $830 in the Western Zone, or 4.3 percent higher or 
$841 in the Northern Zone, or 4.5 percent higher or $722 in the Eastern 
Zone. 



Appendix A-3 



NATURAL GAS RATE CHANGES GRANTED TO 
UNION GAS LIMITED 
FOR TYPICAL RESIDENTIAL CUSTOMERS 
(FISCAL YEAR APRIL 1, 1983 TO MARCH 31, 1984) 



A typical residential customer, using 3.54 10 ■'m' of qas annually 
for space and water heating, would have incurred an annualized cost of 
approximately $777 based on rates in effect at the beginning of the 
fiscal year. 

During the fiscal year the following rate changes were granted: 

Annualized effect 
Amount per on typical resi- 

Effective Date 1Cpm-* Reason dential customer 



$ 



( approx imat e ly ) 



April 29, 1983 2.31 Gas Cost 8 

April 29, 1983 10.93 Revenue Reguirement 39 
Dec. 21, 1983 (1.67) Gas Cost (6) 



11.57 41 



Based on the above, the annualized cost for a typical residential 
customer at the end of the fiscal year would have been approximately 
5 percent hiqher or approximately $818. 



Appendix B 



BOARD RECOMMENDATIONS RELATING TO THE 
ONTARIO HYDRO 1984 RATE PROPOSAL 

Increase 
( Decrease) 
in Revenue 
Requirement 

$mi llions 

Hydro's forecast of the Canadian (24) 

inflation rate be adjusted and its 
revised forecast of U.S. inflation 
rate be accepted 

Hydro's forecast of interest rates be (11) 

ad j ust ed 

Hydro's forecast of the Canadian 21 

dollar be adjusted 

Hydro's load forecast be adjusted (15) 

Hydro's revised coal costs be accepted 38 

Hydro's revised power purchase costs (28) 

be accepted 

Hydro's forecast of secondary sales nil 

be adjusted and the average price be 
ad j ust ed 

Hydro's electrical capacity factor for 
Bruce A be adjusted 

Hydro's revised charqes for the nuclear 
payback be accepted 

Hydro's forecast nuclear in-service dates 
be delayed 

Hydro's revised productivity cuts be 
accepted 

Hydro's forecast OM&A costs be adjusted 

Hydro's revised pension fund liability 
be accepted 



(5) 


4 


(11) 


(5) 


(17) 


3 



Appendix R 



Hydro's forecast of revised training costs 
be adjusted 

Hydro's accounting policy for the 
capitalization of training costs be altered 

Hydro's revised interest expense be 
accepted 

Hydro's revised decommissioning charges be 
accepted 

Hydro's accounting treatment for BHWP A 
be altered 

Hydro's reguested net income be adjusted 
to no more than $350 million 

Hydro's interest costs be adjusted 



TOTAL 



Increase 
( Decrease) 
in Revenue 
Reguirement 



$millions 
8 

1 

(35) 



(54) 



(116) 



The effect of this total downward adjustment in 
revenue reguirement of $116 million would be to lower 
Hydro's proposed average rate increase from 9.7 percent to 
6. 3 percent . 



Appendix C 






Appendix D 



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Q- C 
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Appendix E 



SELECTED STATISTICS 
MAJOR ONTARIO NATURAL GAS UTILITIES* 
(Fiscal Year April 1, 1983 to March 31, 1984) 



Number of Customers : 

Resident ial 

Commercial & Industrial 

Total 



1984 1983 

( rounded) 



1 ,247,700 

144,100 

1 ,391 ,800 



1,199,400 

138,600 

1 ,338,000 



Sales Vol ume : 



(10 3 m 3 ) 



Resident ial 

Commercial & Industrial 

Total 



4,100,700 
14,032,100 
18,132,800 



4,299,600 
14,462,400 
1A, 762, 000 



Sales Revenue: ($000) 



Resident ial 

Commercial & Industrial 

Total 



932,100 
2,330,600 
3,262,700 



796,800 
1 ,960,800 
2,757,600 



Distributors' Cost of 
Natural Gas: ($000) 



2,652,300 



2,423,500 



Capital Invested in Utility 
Operations (Rate Base) ($000) 



2,202,900 



2,035,200 



Transmission and 
Distribution Pipelines: 

Kilometres 



40,200 



39,200 



* The Consumers' Gas Company Ltd., Northern and Central Gas 
Corporation Limited and Union Gas Limited. 



JUN 3 1992